Business Objectives and Stakeholders
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This revision presentation considers the variety of stakeholders impacted by business activity. How will a change in objectives, such as a move from profit maximisation to revenue maximisation have an effect on different stakeholders?
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Business Objectives and Stakeholders
- 1. Business Objectives and Stakeholders A Level Microeconomics Tutor2u Economics
- 3. Examples of different stakeholders Shareholders Managers Employees Suppliers Customers Creditors The government Wider community
- 4. Business objectives and stakeholders A change in objectives will lead to different price and output combinations This will have an impact on consumers and shareholders And your evaluation can broaden out to consider the possible impact on suppliers, employees and the wider community
- 6. Key business objectives MC Price and Cost Output AC MR AR Profit Max: MC=MR P3 P3
- 7. Key business objectives MC Price and Cost Output AC MR AR Profit Max: MC=MR Revenue Max: MR=0 P2 P3 P2 P3
- 8. Key business objectives MC Price and Cost Output AC MR AR P1 Profit Max: MC=MR Revenue Max: MR=0 Sales Max: AC=AR P2 P3 P1 P2 P3
- 9. Objective Shareholders Consumers Wider community stakeholders
- 10. Objective Shareholders Consumers Wider community stakeholders Profit maximisation (MC=MR) Firm makes the highest profit thus increasing the returns for shareholders Higher prices and lower output lead to a lower level of consumer surplus Profits provide funds for capital investment and more tax revenue for the government to spend
- 11. Objective Shareholders Consumers Wider community stakeholders Profit maximisation (MC=MR) Firm makes the highest profit thus increasing the returns for shareholders Higher prices and lower output lead to a lower level of consumer surplus Profits provide funds for capital investment and more tax revenue for the government to spend Sales revenue maximisation (MR=zero) Profits are lower than with profit maximisation so less is available for shareholder dividends Lower prices than with profit maximisation – so a gain in consumer surplus Likely to be nearer allocative and productive efficiency at lower price and higher output - thus community benefits especially some lower income groups
- 12. Objective Shareholders Consumers Wider community stakeholders Profit maximisation (MC=MR) Firm makes the highest profit thus increasing the returns for shareholders Higher prices and lower output lead to a lower level of consumer surplus Profits provide funds for capital investment and more tax revenue for the government to spend Sales revenue maximisation (MR=zero) Profits are lower than with profit maximisation so less is available for shareholder dividends Lower prices than with profit maximisation – so a gain in consumer surplus Likely to be nearer allocative and productive efficiency at lower price and higher output - thus community benefits especially some lower income groups Sales maximisation (AC=AR) Normal profit earned so shareholders will receive lower dividends. Prices are much lower than profit max, so many customers benefit. AR=AC thus firm maximises output which may benefit employment at the firm less profit for higher wages?
- 13. Use the concept of stakeholders in your exam!
- 14. Business Objectives and Stakeholders A Level Microeconomics Tutor2u Economics
Notas do Editor
- Anyone with a vested interest in the activities and the decisions taken by a business There is a difference between stakeholders and shareholders – stakeholders don’t necessarily own a business, a customer for example may have a transactional relationship with a business Stakeholders have different interests in the business Customers have an interest in getting value for money and good quality customer service Suppliers – selling input to a business – want prompt payment and reliable contracts Wider society – impact of business for example on the environment, business compliance with laws, acting in a ethical manner